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2013 (10) TMI 414 - AT - Income TaxTransfer pricing - ALP - purchase of website for AE - depreciation on website - Held that:- the assessee has capitalized the purchase price of the website and has not debited to the P&L A/c, therefore, the addition of the income as determined by the TPO was not called for. However, the disallowance of depreciation in this case is also not warranted. - As seen from the order of DRP, the DRP stated that valuer arrived at the cost of website at ₹ 5,38,31,832/-, as against the cost valued by the Valuer at ₹ 3,67,82,863/-. We are unable to understand from where the said price was taken up by the TPO/DRP. Be that as it may, the assessee has paid only the cost price to its AE and justified the same by providing a valuation report as external CUP. Nothing has been brought on record by the TPO or by the DRP to determine the ALP against the value shown by the assessee. - Since the said website was used in the business, there is no necessity for disallowing depreciation. Power of TPO to restrict the ALP at Nil - Market promotion expenses amounts to ₹ 53,88,834/- - Held that:- Market promotion expenses are reimbursement of the expenses paid to third party for services rendered by them in marketing the website - TPO and DRP considered it as intra-group services and analysed the same on the benefit principle – However, reimbursement of expenditure, the issue of benefit principle may not arise in this case - Both the TPO and DRP went on wrong consideration in determining the market promotion expenses at Nil, treating the transaction as intra-group service – Reliance has been placed upon the judgment of Hon’ble Delhi High Court in the case of CIT Vs. EKL Appliances Ltd [2012 (4) TMI 346 - DELHI HIGH COURT], wherein it has been held that TPO has no power to restrict the ALP at Nil, but is supposed to have determined the ALP of the international transaction as per the methods provided. The TPO has to examine the price paid by the assessee and determine the ALP under the provisions of Transfer Pricing and its Rules. It does not authorize the TPO to disallow any expenditure on the ground that it was not necessary or prudent for the assessee to have incurred the same nor on the reason that the assessee has not justified the benefit principle - Since TPO/DRP have not examined that this expenditure is only reimbursement of expenditure, directed the AO to examine the nature of expenditure and if the amount is only reimbursement paid through AE to third party for their services, AO to allow the expenditure as claimed after due verification - Examination of the expenditure/claim of reimbursement is restored to the file of the AO – Decided in favor of Assessee.
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